Draft National Civil Aviation Policy 2015 – Response

The draft National Civil Aviation Policy 2015 released on 30th October 2015 talks about a plethora of issues affecting the sector and the proposals affect the airlines, airports and the general public.

While there are some good initiatives like;

Real time safety tracking and prompt incident reporting

Comprehensive review of all CARs once every 5 years

Automation of services rendered by DGCA

Intimation and not permission for Code share where Air Services Agreement (ASA) allows for code share

The policy is largely vague and the most important aspects have kept open ended except for MRO, ground handling and Helicopter operations. My humble suggestions on few points

5/20 rule

The open ended policy on 5/20 will invite a wide variety of comments and suggestions. Domestic Flying Credits (DFCs) even in its revised form is complex to calculate and a barrier for expansion. Since the calculation is linked to ASKMs (Available Seat Kilometres) airlines like Vistara having lesser seats per aircraft will have to fly more flights than competition to fulfil this criterion.

There should either be a removal of 5/20 or have a phased removal of 5/20 as below.

This would mean Air Asia India will be eligible to fly international in 2017 and Vistara in January 2018

Phase – 2: Convert the rule to 1/5 effective 1st January 2019.

This ensures that the players who started international operations based on 3/15 rule, also get a breather from unexpected immediate competition and get to plan their operations.

The existing players – Air India, Jet Airways, IndiGo & Spicejet get a five year intimation about this change.

This rule of 1/5 should be linked to accident / incident history in the first year of operations including safety and operations, to have additional checks. This could be linked to On Time Performance and cancellation rate.

There could be an exception to this policy for routes where only foreign carriers utilize the quota and none of the airlines from India operate. There are number of such examples including routes to Central Asian Countries as well as sectors like Doha – Goa, where only Qatar airways operates a flight.

These routes should be opened up for new players after one year of successful operations and a fleet of minimum of 5 aircraft. This would help India utilize its share of seats under bilateral arrangement and the carriers who currently have rights to fly international should not have a problem, since the new carriers will not start flights on the routes on which they ply.

Regional Connectivity Scheme (RCS)

Revival of un-served airports is a good move; however the policy has kept under-served as an ambiguous term. Since Viability Gap Funding (VGF) is involved, under-served needs to be properly defined before giving the policy its final shape.

The cost of Rs. 2500/- per passenger per hour does not give additional details on calculation. If the calculation will be half hourly (Rs.1250/-) or for a 15 minute bracket. These cases will come up when flights between two destinations under RCS have a flying time of 1:05; will the cost be Rs. 5000/- per passenger in this case?

A turboprop, regional jet and a narrow body have different cost of operations and a flat rate of Rs. 2500/- per passenger per hour will not do justice. Instead routes should be identified under RCS and reverse auctioned for a period of three years at a time.

People are bound to complain against the levy of 2% on all routes except Category IIA and RCS. The policy should not see potential passengers drop out from other routes to create a fund which would help a handful fly once a year. This is completely against the basics of open market economy.

While the scheme has good intention, I have huge doubts on its feasibility in implementation.

Scheduled Commuter Airline (SCA)

While a novel concept is being proposed, the policy is silent on the existing Regional Operator licence and its continuation in the long run.

The policy specifies that the aircraft capacity will have to be 100 seats or less which will help sell turboprops like ATR & Q400 along with regional jets like Embraer. However there should be incentives for these airlines

The policy stipulates that SCA operate a minimum number of movements per week to RCS but does not specify the number. Since RCS is based on bidding, the linkage of these two will not help create a lot of Scheduled Commuter Airlines – which otherwise would link a lot of Tier II cities with each other

The subsidy for SCAs flying to Srinagar and Northern eastern states is not detailed out and has a passing reference in the policy

Scheduled Commuter Airline should replace Regional Airline and continue to have cap on number of seats per aircraft which will help the airline launch to not so popular routes but those which still see some traffic. This will be across the regions unlike what the current Regional Airline policy permits.

Bilateral Traffic Rights

The initiative to propose open skies for SAARC and countries beyond 5000 km is good. However it is planned for in 2020 by when the country should plan for even bigger strides. The proposed bidding route without a minimum cost per seat is a very faulty model in my opinion.

Eg: For India to Dubai, Emirates is bound to bid for seats. However since no other airline from Dubai is likely to bid, this bid could fold at very low rates and the foreign carriers like Emirates, Turkish, etc could benefit largely from higher seats and lower bids affecting Air India and other airlines in India

The policy also talks about renegotiation of ASA when airlines from India come close to utilisation of its quota but remains silent on what is definition of “close”.

Route Dispersal Guidelines

With the proposal to have all routes which would have annual traffic of 5 lakh passengers, average seat factor of 70% and have flying distance beyond 700kms be considered as part of Category I, the routes which will be part of this will see exponential increase. This will then affect the deployment on Category II, IIA and III routes, which may not be a valuable proposition for the airlines.

Instead, there has to be a cap on maximum number of routes which can be included in Category I. The proposal should cap the number to 20 and the calculation should be based on data for past 3 years and not just the year prior to the calculation.

Category I:

Top 20 routes in the country in terms of capacity deployed (ASKMs) to be considered.

These would be applicable for a period of 3 years

Updated list of top 20 routes will be published two scheduling seasons prior for ease of airline planning

Category II:

Addition of stations – Dehradun, Simla, Kullu, Dharamshala

No change in deployment requirements – 10% of ASKM deployed on Category I routes should be deployed on Category II routes

Category IIA

All stations which are part of RCS (Regional Connectivity Scheme) to be considered as Category IIA to incentivise operations under RCS

No change in current calculation – 1% of ASKM deployed on Category I route should be deployed on Category IIA routes

Category III:

No change in existing setup

In addition to this, the calculation should be on yearly basis which will help airlines fly to these sectors as per seasonality. This will also help reduce airfares due to increased capacity

E.g.: Airlines could have additional flights on Kolkata – Port Blair or Chennai – Port Blair during winter months and get additional Category 2 ASKM, which they can use during other times of the year. Similarly, airlines can plan more flights to Jammu, Srinagar, Bagdogra, Leh, Guwahati during summer to get more Category 2A ASKMs which can be utilized for calculation later.

Closing Comments

There have been areas which have seen some detailed work, like MRO. The long pending question of Ground Handling is now resolved. However a lot more is needed to get the airlines to the discussion table to close the long pending issues like 5/20.

The government should not wait for the policy to be accepted across different areas and start working / implementing those areas which are agreed upon. This will help the sector, which is stuck in policy paralysis, move forward.

A larger focus is needed on the infrastructure since both Delhi and Mumbai airports are close to saturation points and expansion of infrastructure is a costly and time consuming affair.

The chances that there will be an agreement on the policy in its current format look slim.

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